ING to Raise as Much as $1.54 Billion in U.S. Insurer IPO

ING Groep is selling shares after U.S. stocks have risen to record levels and volatility in the market has subsided. The company has to divest the business as a condition of its 2008 bailout. Photographer: Jock Fistick/Bloomberg

April 17 (Bloomberg) -- ING U.S. Inc., the American
insurance unit of ING Groep NV, plans to raise as much as $1.54
billion in an initial public offering as its Dutch parent
focuses on operations at home.

The division and its parent are offering 64.2 million
shares for $21 to $24 apiece, the U.S. business said yesterday
in a regulatory filing. Amsterdam-based ING Groep will own 75
percent of ING U.S. after the IPO, the filing showed. The unit
plans to change its name to Voya Financial after the share sale.

At the midpoint of the range, the American unit’s market
value would be about $5.78 billion, according to data compiled
by Bloomberg. ING Groep is selling shares after U.S. stocks have
risen to record levels and volatility in the market has
subsided. The company has to divest the business as a condition
of its 2008 bailout.

“It seems like it’s fairly priced,” said Vincent Lui, an
equity analyst at Morningstar Inc. in Chicago. “It’s still a
very difficult environment” for insurers, he said.

Based on a valuation of $5.78 billion, the company would
trade for about 42 percent of book value, a measure of assets
minus liabilities. That compares with more than 60 percent at
MetLife Inc., the largest U.S. life insurer.

Profit Pressures

Investors will examine risks at ING U.S. tied to stock-market volatility and low bond yields, Lui said. They will also
evaluate links to its European parent, he said.

Interest rates close to record lows have pressured profits
at life insurers, which invest premiums from clients in bonds
and other assets. Slow economic growth in the U.S. and Europe
has curbed sales, Moody’s Investors Service said in January.

The IPO pricing “doesn’t change my valuations, it’s pretty
much in line with what I had in mind,” said Benoit Petrarque,
an Amsterdam-based analyst at Kepler Capital Markets with a
reduce recommendation on the stock.

No. 2 IPO

At the top of the price range, ING U.S.’s IPO would be the
second largest in the U.S. this year, behind the $2.6 billion
initial offer by Pfizer Inc.’s animal-health unit Zoetis Inc. in
January, data compiled by Bloomberg show.

Morgan Stanley, Goldman Sachs Group Inc. and Citigroup
Inc., all based in New York, are leading the offering, according
to the filing. The underwriters have the option of buying
additional shares, which could reduce the parent’s stake to
about 71 percent, ING Groep said in a statement.

Depending on the final price, the number of shares sold by
the parent and unit will be adjusted to make the U.S. division’s
gross proceeds equal to $600 million, the filing showed.

ING U.S. is led by Chief Executive Officer Rodney Martin, a
former manager at American International Group Inc., and offers
life insurance, savings products and annuities. It had about 13
million customers as of Dec. 31, according to a regulatory
filing. Rivals include MetLife and Prudential Financial Inc.,
the No. 2 U.S. life insurer.

In a document last year, ING U.S. filed for a $100 million
IPO, a placeholder amount. ING Groep, which has to complete the
disposal of the unit by the end of 2016, expects 800 million
dollars to 900 million dollars in proceeds from the first sale.

Debt Payment

As the bank and insurer sheds its global insurance and
investment management businesses, it has to disentangle the
financial ties existing between the company’s units. ING Groep
will use the proceeds of the IPO to reduce debt at group level.
The sale won’t have an impact on the parent’s profit, while it
will cut shareholders’ equity by about 1.6 billion euros at the
midpoint of the range.

“We feel confident that a 25 percent partial IPO can be
achieved before year-end,” Francois Boissin, a Paris-based
analyst at Exane BNP Paribas said in a note to investors dated
April 4. “Uncertainties still revolve around the closed block
variable annuities and the necessary deleveraging ahead of the
IPO, yet we believe there is sufficient appetite for ING U.S.’s
core operations to overcome these concerns.”

Boissin has an outperform rating on the shares.

ING received 10 billion euros from the Netherlands in 2008,
triggered as subprime mortgage assets held at its U.S. unit
plunged. Chief Executive Officer Jan Hommen has repaid 7.8
billion euros as well as 2.4 billion euros in interest and
premiums.